Law Amending and Supplementing Certain Articles of the Value Added Tax Law No. 13/2008/QH12 amended by No. 31/2013/QH13

LAW

Amending and supplementing certain articles of the Value Added Tax Law number 13/2008/QH12

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Pursuant to the Constitution of the Socialist Republic of Vietnam in 1992 as amended and supplemented by Resolution number 51/2001/QH10;

The National Assembly promulgates the Law amending and supplementing certain articles of the Value Added Tax Law number 13/2008/QH12.

Article 1

Amending and supplementing certain articles of the Value Added Tax Law:

1. Clauses 4, 7, 8, 11, 15, 17, 23, and 25 of Article 5 are amended and supplemented as follows:

"4. Salt products produced from seawater, natural rock salt, refined salt, iodized salt with the main component being sodium chloride (NaCl)."

"7. Life insurance, health insurance, student insurance, other insurance services related to human beings; pet insurance, crop insurance, other agricultural insurance services; insurance for fishing vessels, equipment, and other necessary tools directly serving fishing activities; reinsurance."

8. The following financial and banking services, securities trading:

a) Credit services including: lending; discounting and rediscounting transferable instruments and other negotiable instruments; guarantee; financial leasing; issuing credit cards; domestic factoring; international factoring; other forms of credit services as prescribed by law;

b) Loan services of taxpayers who are not credit institutions;

c) Securities trading including: brokerage; proprietary trading; underwriting; investment advisory; custody; management of investment funds; portfolio management; service organizing the market of the stock exchange or securities trading center; other securities trading activities as prescribed by law on securities;

d) Capital transfer including: transferring part or all of the invested capital, including the sale of enterprises to other enterprises for production and business purposes, transferring securities; other forms of capital transfer as prescribed by law;

đ) Sale of debt;

e) Foreign currency trading;

g) Derivative financial services including: interest rate swap; forward contracts; futures contracts; options to buy or sell foreign currencies; other derivative financial services as prescribed by law;

h) Sale of collateral assets of organizations wholly owned by the State with 100% paid-in capital established by the Government to handle non-performing loans of Vietnamese credit institutions."

"11. Services maintaining zoos, flower gardens, parks, street trees, public lighting; funeral services."

"15. Publishing, importing, distributing newspapers, magazines, specialized newsletters, political books, textbooks, teaching materials, legal texts, scientific and technical books, books printed in ethnic minority scripts, paintings, posters, propaganda and promotional pictures, including in the form of audio tapes or video discs, electronic data; money, printing money."

"17. Machinery, equipment, spare parts, materials belonging to types not yet manufactured domestically and imported for direct use in scientific research and technological development activities; machinery, equipment, spare parts for replacement, special transportation vehicles, and materials belonging to types not yet manufactured domestically and imported for conducting exploration, development of oil and gas fields; aircraft, drilling platforms, ships belonging to types not yet manufactured domestically and imported to create fixed assets of enterprises or leased from abroad for production, business, leasing, subleasing."

"23. Export products are raw materials, minerals extracted but not processed into other products."

"25. Goods and services of households and individuals engaged in business with annual turnover of up to one hundred million dong.

Business establishments providing goods and services exempt from value added tax as stipulated in this Article shall not be entitled to deduct and refund input value added tax, except in cases where the zero percent tax rate prescribed in Clause 1 of Article 8 of this Law is applied."

2. Points a, b, and d of Clause 1 of Article 7 are amended and supplemented as follows:

"a) For goods and services sold by production and business establishments, it is the selling price excluding value added tax; for goods subject to special consumption tax, it is the selling price including special consumption tax but excluding value added tax; for goods subject to environmental protection tax, it is the selling price including environmental protection tax but excluding value added tax; for goods subject to both special consumption tax and environmental protection tax, it is the selling price including both special consumption tax and environmental protection tax but excluding value added tax;

b) For imported goods, it is the import price at the customs port plus import duty (if applicable), plus special consumption tax (if applicable), and plus environmental protection tax (if applicable). The import price at the customs port is determined according to the regulations on the taxable price of imported goods;"

"d) For asset leasing activities, it is the lease amount excluding value added tax. In case of lease payments made periodically or prepaid for the lease period, the taxable price is the lease amount paid periodically or prepaid for the lease period excluding value added tax;"

3. Amending and supplementing Clause 1 of Article 8; adding point q to Clause 2 of Article 8 as follows:

"1. The zero percent tax rate applies to exported goods and services, international transport, and goods and services exempt from value added tax as stipulated in Article 5 of this Law when exported, except in the following cases:

a) Transfer of technology, transfer of intellectual property rights to foreign countries;

b) Reinsurance services provided to foreign countries;

c) Credit services;

d) Capital transfer;

đ) Derivative financial services;

e) Postal and telecommunications services;

g) Export products are raw materials, minerals extracted but not processed into other products as stipulated in Clause 23 of Article 5 of this Law.

Exported goods and services are goods and services consumed outside Vietnam, within non-tariff zones; goods and services provided to foreign customers as prescribed by the Government."

"2. The five percent tax rate applies to the following goods and services:

q) Sale, lease, lease-purchase of social housing as prescribed by the Law on Housing."

4. Article 10 shall be amended and supplemented as follows:

"Article 10. Method of tax deduction

1. The method for deducting value-added tax is prescribed as follows:
a) The amount of value-added tax payable under the tax deduction method equals the output value-added tax minus the deductible input value-added tax.
b) The output value-added tax amount equals the total value-added tax amount of goods and services sold recorded on the value-added tax invoice.

The value-added tax amount of goods and services sold recorded on the value-added tax invoice equals the taxable price of the taxable goods and services sold multiplied by the applicable rate of value-added tax for those goods and services.

In cases where payment vouchers record the payment price including value-added tax, the output value-added tax amount is determined by subtracting the taxable value-added tax amount calculated according to point k, clause 1, Article 7 of this Law from the payment price.

c) The deductible input value-added tax amount equals the total value-added tax amount recorded on the value-added tax invoices for purchased goods and services, import value-added tax payment certificates, and meets the conditions stipulated in Article 12 of this Law.

2. The deduction method for value-added tax applies to business establishments that fully comply with accounting records, invoices, and payment vouchers as prescribed by laws on accounting, invoices, and payment vouchers, including:
a) Business establishments with annual revenue from selling goods and providing services of one billion VND or more, excluding individual households engaged in business operations;
b) Business establishments voluntarily registering to apply the value-added tax deduction method, excluding individual households engaged in business operations.

3. The Government shall provide detailed regulations for this Article."

5. Article 11 is amended and supplemented as follows:

"Article 11. Direct calculation method on value-added tax

1. The amount of value-added tax payable under the direct calculation method on value-added tax equals the value-added tax amount multiplied by the applicable rate of value-added tax for gold, silver, and precious stone trading activities.

The value-added tax amount of gold, silver, and precious stones is determined by subtracting the purchase payment price of gold, silver, and precious stones from the sale payment price of gold, silver, and precious stones.
2. The amount of value added tax payable under the direct calculation method on value added is calculated by applying the percentage rate to revenue as follows:
a) Applicable subjects:

- Enterprises and cooperatives with annual revenue below the threshold of one billion VND, except in cases where they voluntarily apply the value-added tax deduction method as provided for in clause 2, Article 10 of this Law;

- Households and individuals engaged in business;

- Foreign organizations and individuals conducting business without a permanent establishment in Vietnam but generating revenue in Vietnam without fully complying with accounting records, invoices, and payment vouchers, except foreign organizations and individuals supplying goods and services for oil and gas exploration, development, and exploitation activities which pay taxes through the deduction method by the Vietnamese side withholding and remitting on their behalf;

- Other economic organizations, except in cases where they voluntarily apply the value-added tax deduction method as provided for in clause 2, Article 10 of this Law;
b) The percentage for calculating value-added tax is as follows:

- Distribution and supply of goods: 1%;

- Services, construction excluding materials: 5%;

- Production, transportation, service attached to goods, construction with material supply contracts: 3%;

- Other business activities: 2%."

6. Article 12 is amended and supplemented as follows:

"Article 12. Deduction of input value-added tax
1. Businesses subject to value-added tax under the tax deduction method shall deduct input value-added tax as follows:

a) Input value-added tax of goods and services used for producing and trading taxable goods and services can be deducted in full, including input value-added tax of non-compensable goods and services subject to value-added tax that have been lost;

b) Input value-added tax of goods and services used simultaneously for producing and trading taxable and non-taxable goods and services can only be deducted for the portion of input value-added tax of goods and services used for producing and trading taxable goods and services. Business establishments must separately account for deductible input value-added tax and non-deductible input value-added tax; if separate accounting is not possible, the deductible input value-added tax is calculated as a percentage of the revenue from taxable goods and services relative to the total revenue from goods and services sold;

c) Input value-added tax of goods and services sold to organizations and individuals using humanitarian aid and non-repayable aid funds can be deducted in full;

d) Input value-added tax of goods and services used for oil and gas exploration, development activities can be deducted in full;

đ) Input value-added tax arising in a month is declared and deducted when determining the tax payable for that month. If a business establishment discovers errors in the declaration and deduction of input value-added tax, it may declare and supplementally deduct before the tax authority announces the decision to inspect or audit at the taxpayer's place of business.

2. Conditions for deducting input value-added tax are stipulated as follows:

a) Having a value-added tax invoice for purchasing goods and services or a tax payment certificate for imported goods;

b) Having a non-cash payment voucher for purchased goods and services, except for goods and services purchased individually each time with a value of less than twenty million VND;

c) For exported goods and services, in addition to the conditions stipulated in points a and b of this clause, there must also be: a contract signed with a foreign party regarding the sale or processing of goods and provision of services; a sales invoice for goods and services; a non-cash payment voucher; a customs declaration form for exported goods.

Payment for exported goods and services in the form of offsetting between exported goods and services and imported goods and services, or paying off state debts, is considered non-cash payment."

7. Article 13 is amended and supplemented as follows:

"Article 13. Cases of refunding tax
1. A business establishment that pays value-added tax under the deduction method, if there is an unutilized input value-added tax amount in a month or quarter, can deduct it in the following period; if, after accumulating for at least twelve months from the first month or at least four quarters from the first quarter, there is still an unutilized input value-added tax amount, the business establishment can request a tax refund.

In cases where a business establishment that has registered to pay value-added tax under the deduction method has a new investment project in the investment phase, with an unutilized input value-added tax amount from purchased goods and services for investment of three hundred million VND or more, it can request a value-added tax refund.

2. Business establishments that have exported goods or services in a month or quarter and have input VAT not yet deducted amounting to three hundred million dong or more shall be refunded VAT on a monthly or quarterly basis.

3. Business establishments subject to VAT under the deduction method shall be refunded VAT when transferring ownership, converting enterprises, merging, consolidating, splitting, dissolving, going bankrupt, or ceasing operations with excess paid VAT or input VAT not fully deducted.
4. Foreign individuals or Vietnamese residents abroad holding passports or entry permits issued by foreign competent authorities shall be refunded VAT on goods purchased in Vietnam and carried out of the country upon departure.

5. The refund of VAT for programs and projects using Official Development Assistance (ODA) non-repayable funds or non-repayable aid and humanitarian aid shall be regulated as follows:

a) The program or project owner, main contractor, or organization designated by the foreign donor to manage programs and projects using ODA non-repayable funds shall be refunded the VAT already paid for goods and services purchased in Vietnam for the purposes of the program or project.

b) Organizations in Vietnam using non-repayable aid or humanitarian aid funds from foreign organizations or individuals to purchase goods and services for non-repayable aid or humanitarian aid programs in Vietnam shall be refunded the VAT already paid for those goods and services.

6. Recipients entitled to diplomatic privileges and immunities under the law on diplomatic privileges and immunities who purchase goods or services in Vietnam for their own use shall be refunded the VAT recorded on the VAT invoice or payment voucher showing the payment price inclusive of VAT.

7. Business establishments with a decision to refund VAT issued by a competent authority in accordance with the law and cases of VAT refunds pursuant to international treaties to which the Socialist Republic of Vietnam is a party.

Article 2

1. This Law shall take effect from January 1, 2014, except for the provisions in Clause 2 and Clause 3 of this Article.

2. The provision of a 5% tax rate for the sale, lease, or lease-purchase of social housing as stipulated in Clause 3 of Article 1 of this Law shall be implemented from July 1, 2013.

3. A reduction of 50% in the 10% VAT rate from July 1, 2013 to June 30, 2014 for the sale, lease, or lease-purchase of commercial housing units that are completed with a floor area of less than 70 square meters and a selling price below 15 million dong per square meter.

4. The Government shall provide detailed regulations and guidance for implementing the provisions assigned in this Law.

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This Law was adopted by the National Assembly of the Socialist Republic of Vietnam, the 13th term, fifth session, on June 19, 2013./.